Community Guide to the Proposed FY2021 BudgetPresentation at the December 8, 2020 Public Meeting

Agenda

• FY2021 Budget Overview • Financial Review/Budget Planning Factors• Grant Funded Programs• Capital Improvement Program (CIP)• General Fund Activities• FY2021 Financial Work Plan• Discussion

2

Budget Overview – Total Funds ($737.7M)

3

48%

7%

45%

General Revenues - $355.2

Capital Programs - $54.3

Grant Programs - $328.2

Social Welfare10%

Courts6%

Criminal Justice11%

General Government 3%

Debt Service4%

Employee Fringe Benefits

7%Subsidies

and Services

5%Capital Projects7%

Grant Programs45%

} {*Other Expenses include debt, employee benefits, grants, subsidies, transfers and other costs.

TransportationParks & RecreationRegistrations/ ElectionsTax AdministrationFinancial Management

Budget Overview

4

48%

7%

45% 2%

Financial Review/Budget Planning Factors

5

Policy

FinanceOperations

FY2021 – Setting a New Agenda

• Embracing the Pillars of Transparency, Accountability, Equity, and Sustainability.

• Council PrioritiesoProtecting the Community’s Healtho Investing in Our Neighborhoods, Not Profiting from IncarcerationoCreate Value for Business, Workers, and our CommunityoCreating a More Responsive and Agile Government

• Three factors were the “drivers” in 2020o Significant changes in leadership – elected and appointedo Transformation and modernization of the elections infrastructureoCOVID-19 impacts on our County government

6

Priority Initiatives and the Budget• Protecting the Community’s Health and Safety

o Costs to form the County Health Department – General Fund (GF) balanceo Costs associated with COVID vaccinations – Grants/GF Balance

• Not Profiting from Incarceration o Additional costs from de-privatization of the GWH Correctional Facility (GF Balance)

• Responsive and Agile Governmento Reduction in the cost of employee benefits while expanding optionso Renewal of Collective Bargaining Agreements o Future impacts of remote work environment on County facilities/service delivery

• Creating Value for Business, Workers, and Our Communityo Re-imagining of the Commerce Center and Approach to Economic Development

7

Observations• Budget process is largely manual with knowledge vested in a few key personnel

o Preparation of the budget and monthly financial reports are labor intensiveo Reconciliation of revenues lags receipt and recording of expenseso Seasonality of finances not knowno Funds exist in multiple accounts that need reconciliation and transparency

• Current practice does not display total cost of service deliveryo Directors do not have the tools to actively manage their budgetso Indirect costs not allocated to departments (e.g. benefits)

• Significant variances exist between budgets and expenditures• Charges for fee-based services do not cover costs• Governmental Operations typically carry a 20% vacant positions• Tax and fee revenues are flat• Future state and federal funding levels are uncertain

8

Approach to the FY2021 Budget• Statement of Values: Transparency, Accountability, Equity, Sustainability

o Complete View of Major Programs: Grants, Capital, & General Fundo Address 20% Vacancy Rate in County (General Government) Positionso Work to Achieve Financial Sustainability (Balance Recurring Sources and Uses)o Eliminate Variances between Budgets and Actuals to Better Use Resourceso Establish Uncommitted Fund Balance (Initially $23M)

• Long Term View: Relieve Tax Burden while Maintaining Quality of Serviceso No Increase in Property Tax Rateo Review Fee Structure for Services – Identify General Fund Subsidies

• Acknowledge FY2020 was an Anomalyo Compare FY2021 Budget to FY2019 Actualso Leverage Impacts of CARES Act Fundingo General Government Revenue Sources Discounted (~$12M)

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Grant-Funded Programs

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Grant Funded Programs ($000K)Program 2021 Estimate

- Clinical & Youth Services $ 44,756

- Mental Health 38,414

- Intellectual Disabilities 14,552

- Early Intervention 7,297

- Behavioral Health/Care 139,250

- Early Learning 60,945

- Drug & Alcohol 6,427

- Services for the Aging 4,403

- Other Grants 12,148

TOTAL $328,192

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Risk Factors• County FY does not align with State/Federal. Budget assumes funding will be renewed at current levels.• Funding may not keep up with growth in expenses. Additional General Fund subsidies may be required.• Current business practices may not reflect future service delivery models.

14%

12%

4%

2%

42%

19%

2% 1%4%

Capital Improvement Program (CIP)

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CIP Overview

• The CIP is the County’s primary mechanism for infrastructure repair, replacement and development

• Capital projects are currently defined as those costing >$500 with an asset life of >1 year

• CIP funds are borrowed - FY2021 debt service is $29.5M• County has a Aa1 bond rating with Moody’s (high quality/low risk)• Categories of work are Facilities and Buildings; Equipment; Parks,

Trails and Open Space; Partnerships and Other Initiatives• Pursue adding a Technology component to the CIP

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Capital Improvement Program (5-Year Projection)

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Capital Improvement Program – Estimated Cash FlowSource of Funds 2021 2022 2023 2024 2025

Beginning Balance $53,239,281 $34,641,281 $4,371,281 $4,479,281 $2,332,281

Proceeds - New Financing 35,000,000 35,000,000 20,000,000 10,000,000 5,000,000

Interest Income 300,000 500,000 500,000 200,000 200,000Other Income 448,000 448,000 448,000 448,000 448,000

Total Funds Available $88,987,281 $70,589,281 $25,319,281 $15,127,281 $7,980,281

Programmed Use of Funds (54,346,000) (66,218,000) (20,840,000) (12,795,000) (6,670,000)

Net Funds Remaining $34,641,281 $4,371,281 $4,479,281 $2,332,281 $1,310,281

Capital Improvement Program – 2021 (Current)Use Amount ($000K)

Facilities & Buildings () $40,465

Equipment () 6,081

Parks, Trails & Open Space () 5,500

Partnerships () 2,300

TOTAL $54,346

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74.5%

11.2%

10.1%

4.2%

FY2021 Initiatives:• Re-structuring/re-activation of CIP Steering Committee• “Green Fleets” conversion• Facilities Condition Assessment/Energy Analysis• Repurposing of Space (COVID/Remote Working)• Prison/Fair Acres Improvements• 911 System Upgrades• Support of County Health Department development

General Fund Program

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Sources of FundsSOURCES OF FUNDS: FY2020 – FY2021 ($000)

SOURCE OF FUNDS 2020 BUDGET 2021 BUDGET

Property Taxes $171,793 $171,793

Fees 34,622 34,622

Government Operations 57,116 45,164

Federal & State Grants 71,451 100,326

Fund Balance 23,099 3,252

TOTAL REVENUES $ 358,081 $ 355,158

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48%

10%

13%

28%

1%2021 Sources of Funds

The FY2021 budget discounts ~$12.3M in Airport, Gaming, and other revenue sources from FY2020 due to COVID-related impacts.

Comparative County Property Tax Rates (2020)

Jurisdiction Average Home Value County Millage Rate Average County Property Tax Average % of Value

Chester County $334,000 4.369 $1,459 0.436%

Montgomery County $297,200 3.459 $1,028 0.346%

Delaware County $232,300 5.461* $1,268 0.546%

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County Taxes (shown in blue) are ~$0.11 out of your tax dollar. Local taxes (shown in red) task ~$0.17. School taxes (shown in

green) average ~$0.72.

The tax levy is a combination of township/city, school district, and Countymillages. While there is no true “average” millage, the “median value” ofthe County burden is about 11% of the total tax dollar.

*For 2021, the County undertook a reassessment of property taxes asrequired by state law. While many property owners saw changes in theirproperty taxes, the reassessment was “revenue neutral” and did notresult in additional funds flowing to the County. The calculated millagerate for 2021 is 3.112.

Commercial real estate accounts for ~26% of the total assessed value.

Property Tax Revenues ($000)

Year County Rate

Property Tax

Revenue

Total GF Budget

% from Property

Tax

2013 5.604 $160,952 $330,012 48.8

2014 5.604 $166,986 $336,660 49.6

2015 5.604 $167,919 $338,552 49.6

2016 5.604 $171,942 $354,286 48.5

2017 5.604 $175,190 $353,057 49.6

2018 5.604 $177,034 $357,051 50.0

2019 5.461 $171,263 $354,877 48.4

2020 5.461 $171,793 $358,081 48.0

2021 3.112 $171,793 $355,158 48.4

19

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

2014 2015 2016 2017 2018 2019 2020 2021

Cumulative Growth Rate Comparison

Cumulative Inflation Property Tax Growth Rate Budget Growth Rate

Governmental Operations Revenues GENERAL GOVERNMENT COST OF SERVICE RECOVERY

2019 ACTUALS 2020 BUDGET 2021 BUDGET

Fee for Service Revenues $57,140,669 $57,116,000 $45,164,172

Costs of Associated Services 55,084,294 62,773,000 52,082,308

Balance $2,056,375 $(5,657,000) $(6,918,136)

% of Costs Covered by Collections 104% 91% 87%

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Agencies that recover the costs of services should review fee structures for FY2022.Maintenance of Juveniles/Juvenile Court/Detention of Juveniles and Domestic Relations are the primary areas having the greatest impact.

CARES Act FundingExpense Amount ($M)

County Personnel* $45.1

Support to Schools $20.0

Delco Strong $17.3

Pending $4.9

Fair Acres $4.7

Chester County Health $1.6

All Other $1.5

Emergency Services $1.2

Elections $1.1

Courthouse & Park Police $0.8

Library Services $0.7

TOTAL $98.9

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46%

20%

17%

5%

5%

2%

1% 1% 1% 1% 1%

*FY2021 budget assumes $40M in rollover funds created by CARES Act funding

$290,000

$300,000

$310,000

$320,000

$330,000

$340,000

$350,000

$360,000

$370,000

2016 2017 2018 2019 2020 2021

Expenditure History

Budgeted Expenses Actual Expenses

FY2016-FY2021 General Fund Budget History

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Year Budget Actuals Variance Actuals to Budget

2013 $330.0 $321.4 $8.6 97.4%

2014 $336.6 $319.0 $17.6 94.8%

2015 $338.6 $325.5 $13.1 96.1%

2016 $345.1 $331.9 $13.2 96.2%

2017 $353.1 $333.5 $19.6 94.4%

2018 $357.1 $333.9 $29.8 93.5%

2019 $354.9 $325.1 $36.3 91.6%

2020* $358.1 $313.3 $44.8 87.5%

2021** $355.2*Estimated within + range of 10%**Proposed BudgetAll figures in $M

Vacant Position Analysis – General Fund

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Length of Vacancy Number of Positions Percent

0-3 Months 77 23.3%

3-6 Months 20 6.1%

6-12 Months 71 21.6%

1-2 Years 79 24.1%

> 2 Years 81 24.7%

TOTAL 328

• The County has been carrying 20% vacant position for multiple years.• FY2021 budget eliminates 241 vacant positions.• Addressing unused positions reduces indirect costs, which are the biggest budget

variable. The difference between FY2019 actual and FY2021 budget is $14.6M.

Uses of Funds: FY2020-FY2021 ($000K)EXPENDITURES BY SERVICE AREA

AREA 2020 2021 CHANGE $ CHANGE %

Social Welfare $ 74,266 $ 69,799 (4,467) (6.0)

Courts 50,541 43,888 (6,653) (13.2)

Criminal Justice 92,710 81,647 (11,063) (11.9)

Transportation 9,120 9,080 (40) (0.4)

Parks & Recreation 1,816 1,534 (282) (15.5)

Registration & Elections 1,847 4,604 2,757 149.3

Tax Administration 2,617 2,532 (85) (3.2)

Financial Management 2,118 2,496 378 17.8

General Government 20,411 21,794 1,383 6.8

Debt Service 29,326 29,496 170 0.6

Employee Fringe Benefits 48,000 54,627 6,627 13.8

Subsidies and Services* 25,308 33,661 8,353 33.0

TOTAL EXPENSES $358,081 $355,158 $ (2,923) (0.8)

24*Other Expenses include debt, employee benefits, grants, subsidies, transfers and other costs.

20%

12%

23%3%0%1%

1%1%

6%

8%

15%

10%

2021 Use of Funds

Comparison of Expenditure Levels (2019 to 2021) EXPENDITURE AREA 2019 ACTUALS 2021 BUDGET CHANGE $ CHANGE %

Governmental Operations $ 108,558,544 $ 119, 574,044 $ 11,199,409 10.3

Debt 29,433,965 29,496,905 62,940 0.2

Employee Fringe Benefit 39,995,477 54,626,609 14,631,132 36.6

Subsidies and Services 29,628,213 33,661,000 4,032,787 13.6

Fair Acres 69,799,656 69,799,000 (656) -

Prison 47,674,682 48,000,000 325,318 0.7

TOTALS $ 325,090,537 $ 355,157,588 $ 30,067,051 9.2

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The following 11 agencies comprise $7.6M/68% of the total increase in Governmental Operations: Bureau of Elections ($2.1M), Judicial Support ($850K), DA/CID ($808K), Emergency Services ($730K), Executive Director ($577K), Court Administrator ($546K), Adult Probation & Parole ($515K) Juveniles-Combined ($472K), Budget Management ($357K), Planning ($355K), and Intercommunity Health ($283K).

Potential Uses of Fund Balance• Formation of County Health Department

o Financial Analysis o Start-Up Costso Continuing COVID-Related Costs

• De-Privatization of George W Hill Correctional Facilityo De-Privatization Contractor/Owner’s Representativeo Additional Transition and Operational Costs

• Reserve for Revenue Riskso Grant Funded Programso Real Property Taxeso Other Revenue Sources (e.g. Gaming, Airport, Liquid Fuels)

• Potential Assistance to Others• Other Programs and Initiatives

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Other – Commerce Center

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TRANSACTION BALANCE

EDOB Operating Fund Balance (10/31/20) $ 632,356.58

Projected Expenditures Through 12/31/20 (120,632.06) 511,733.52

4th Payment of Approved County Grant 163,800.00 675,533.52

Additional Funds from County (CARES) 180256.99 855,790.51

Projected EOY2021 Balance (630,500) $ 255,290.51

Most recently, Commerce Center funding has been allocated from Gaming Revenues. Cost have also been recovered from the Redevelopment Authority and the Industrial Development Authority. The Commerce Center Executive Director has stated that the Commerce Center can “operate at the current, even expanded level without seeking additional assistance from the County at this time.”

Summary and Discussion

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FY2021 Financial Work Plan• Create a Sustainable and Transparent Budget for FY2022

o Balance recurring revenues and expenseso “Fully load” departmental budgets with all expenseso Develop the tools for County leaders to manage their budgetso Provide secure and automated access to financial datao Link the financial systems to improve reporting and analysis for all programs/fundso Eliminate large variances between budget and actualso Implement quarterly reviewso Integrate performance outcomes into assignment of resources

• Continue development of the CIP Steering Committeeo Create a technology component to the CIPo Review future facility needs and configurations

• Integrate budget for County Health Department• Provide for County operation of the George W Hill Correctional Facility• Review, update and upgrade County financial policies

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�Community Guide to the Proposed FY2021 BudgetAgendaBudget Overview – Total Funds ($737.7M)Budget OverviewFinancial Review/Budget Planning FactorsFY2021 – Setting a New AgendaPriority Initiatives and the BudgetObservationsApproach to the FY2021 BudgetGrant-Funded ProgramsGrant Funded Programs ($000K)Capital Improvement Program (CIP)CIP Overview Capital Improvement Program (5-Year Projection)Capital Improvement Program – 2021 (Current)General Fund ProgramSources of FundsComparative County Property Tax Rates (2020)Property Tax Revenues ($000)Governmental Operations Revenues CARES Act FundingFY2016-FY2021 General Fund Budget HistoryVacant Position Analysis – General FundUses of Funds: FY2020-FY2021 ($000K)Comparison of Expenditure Levels (2019 to 2021) Potential Uses of Fund BalanceOther – Commerce CenterSummary and DiscussionFY2021 Financial Work Plan